GM may be getting all the headlines with its bankruptcy. But as the automaker stalls, a Silicon Valley giant is revving up. Cisco Systems will take GM's place in the Dow Jones Industrial Average of 30 stocks. This means more than fifteen percent of the storied Dow will be made up of pure technology plays. The stock market goes north and south. But the long-term trend is clear: It's heading west, towards Silicon Valley.
HP, Intel, IBM (admittedly, a New York-based firm), and Microsoft have all established themselves as Dow stocks, despite long suffering from a certain East Coast bias. It goes like this: Wall Street's bankers and investors used to love technology, but then got burned by the dotcom bust, and will never go back again. Meanwhile, technology has become at least as built in to the American economy as energy, transportation, or banking. Really, what belongs in your portfolio: HP, or Bank of America? Both are Dow stocks. One is leading the way into the future. One's threatened daily with irrelevance, or worse, obsolescence. Take your pick.
As GM mercifully leaves the average, Cisco makes sense to take its place. It plays a big role in the ever-expanding internet, has long been a leader in telecommunications, and is even making inroads in the consumer space. It's a company with a set revenue base, that is clearly willing to take risks. When was the last time anyone said that about Alcoa, or Home Depot?
U.S. & World
It's also interesting to me that so many of the "Industrials," like Disney, Boeing, and General Electric (parent company of this website) are trying to position themselves as "tech." They use computer animation, high-tech assembly lines, solar power, etc. All components of the Silicon Valley economy. In fact, try to find a movie, jet, or green initiative that doesn't come from the tech world. Fact is, our economy is being led by technology, and bravo to the once-stuffy Dow for recognizing that.